DOUBLE H RANCH, INC. Independent Auditor s Report. Financial Statements. December 31, 2017 (With Comparative Totals for 2016)

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1 Independent Auditor s Report Financial Statements (With Comparative Totals for 2016)

2 Table of Contents Page Independent Auditor s Report 1-2 Financial Statements Statements of Financial Position 3-4 Statement of Activities 5 Statement of Functional Expenses 6 Statements of Cash Flows

3 333 Aviation Road, Bldg B Queensbury, NY Ph: (518) Fax: (518) INDEPENDENT AUDITOR S REPORT To the Board of Directors of Double H Ranch, Inc. We have audited the accompanying financial statements of Double H Ranch, Inc. (a nonprofit organization, hereinafter referred to as the Ranch), which comprise the statement of financial position as of, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Ranch as of, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America

4 Report on Summarized Comparative Information We have previously audited the Ranch s 2016 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 15, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. Whittemore, Dowen & Ricciardelli, LLP Queensbury, New York March 19,

5 Statements of Financial Position and 2016 ASSETS Current Assets: Cash and cash equivalents - unrestricted $ 1,034,924 $ 842,843 Cash and cash equivalents - temporarily restricted 792, ,561 Other pledge receivables 58, ,902 Current unconditional promises to give 640, ,666 Prepaid expenses 10,000 - Inventories 32,616 16,596 Total Current Assets 2,568,918 2,909,568 Property and Equipment: Property and equipment 6,552,657 5,744,356 Construction in progress 1,201, ,302 Less: accumulated depreciation (3,249,753) (2,996,187) Net Property and Equipment 4,504,871 2,986,471 Other Assets: Cash and cash equivalents, non-current - unrestricted 941,895 1,004,008 Cash and cash equivalents, non-current - temporarily restricted - 1,001 Cash surrender value - deferred compensation 367, ,468 Investments, non-current 7,494,375 6,460,683 Unconditional promises to give, non-current 3,446,463 4,170,309 Total Other Assets 12,249,864 11,947,469 Total Assets $ 19,323,653 $ 17,843,508 See Independent Auditor's Report and Notes - 3 -

6 Statements of Financial Position and 2016 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 235,087 $ 37,315 Accrued payroll and payroll taxes 38,369 58,376 Annuities payable, current 5,346 4,506 Notes payable, current 7,821 15,786 Total Current Liabilities 286, ,983 Non-Current Liabilities: Annuities payable, non-current 29,323 27,964 Deferred compensation, non-current 405, ,000 Notes payable, non-current 11,882 19,683 Total Non-Current Liabilities 446, ,647 Total Liabilities 732, ,630 Net Assets: Unrestricted Net Assets: Undesignated, available for general activities 5,481,601 3,566,077 Designated by board of directors 3,923,156 3,928,786 Total Unrestricted Net Assets 9,404,757 7,494,863 Temporarily restricted net assets 1,313,668 2,066,890 Permanently restricted net assets 7,872,400 7,758,125 Total Net Assets 18,590,825 17,319,878 Total Liabilities and Net Assets $ 19,323,653 $ 17,843,508 See Independent Auditor's Report and Notes - 4 -

7 Statement of Activities Year Ended With Comparative Totals for 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Total Operating Revenue: Contributions received for support $ 2,637,921 $ 115,000 $ - $ 2,752,921 $ 2,763,536 Special events (net) 794, , ,833 Non-cash donations 28, ,183 23,377 Rental income 57, ,000 57,000 Interest and dividends 145, , ,781 Merchandise sales (net) and other income 94, ,989 76,946 Released from restrictions 78,161 (78,161) Subtotal 3,836,193 36,845-3,873,038 3,881,473 Realized and unrealized gain on investments 861, , ,679 Total Operating Revenue 4,697,962 36,845-4,734,807 4,190,152 Expenses: Program services 3,014, ,014,982 2,999,429 Support Services: Management and general 395, , ,930 Fund raising 679, , ,758 Total Support Services 1,074, ,074,670 1,054,688 Total Operating Expenses 4,089, ,089,652 4,054,117 Total Operating Income 608,310 36, , ,035 Campaign income (loss) (net) (156,219) 674, , ,249 2,585,421 Annuity loss (6,457) - - (6,457) (2,996) Released from restrictions 1,464,260 (1,464,260) Increase (Decrease) in Net Assets 1,909,894 (753,222) 114,275 1,270,947 2,718,460 Net Assets at Beginning of Year 7,494,863 2,066,890 7,758,125 17,319,878 14,601,418 Net Assets at End of Year $ 9,404,757 $ 1,313,668 $ 7,872,400 $ 18,590,825 $ 17,319,878 See Independent Auditor's Report and Notes - 5 -

8 Statement of Functional Expenses Year Ended With Comparative Totals for 2016 Support Services Program Management Fund Services and General Raising Totals Totals Advertising and promotion $ 49,296 $ 208 $ 54,289 $ 103,793 $ 130,293 Animal care 27, ,612 25,259 Automotive 11, ,833 9,380 Alumni society Bank and credit card fees - 36,056 48,383 84,439 73,433 Capital campaign ,760 Cleaning supplies 10, ,279 16,201 Depreciation 252, , ,958 Dues and subscriptions 928 2, ,685 3,166 Equipment rental 15, ,477 16,757 Filing fees Food and kitchen supplies 309, , ,649 Grounds maintenance 18, ,934 35,144 Insurance 72,598 26,514-99, ,691 Interest Licenses and permits Life insurance premiums ,123 72,123 - Medical and activity supplies 8, ,412 11,112 Medical services 12, ,676 13,256 Miscellaneous Office supplies 28,298 8,045 11,789 48,132 43,269 Payroll taxes and employee benefits 301,514 78,861 74, , ,937 Printing and postage 5,706 2,703 19,961 28,370 59,781 Professional fees and dues ,638-65,138 64,140 Program supplies 149,042-1, , ,886 Repairs and maintenance 115, , ,162 Salaries 1,453, , ,485 1,970,110 1,910,634 Technology 26,947 9,873 18,825 55,645 77,597 Telephone 10,358 12,531 5,131 28,020 17,777 Training 6, ,720 4,851 Travel and meetings 3,789 4,130 2,651 10,570 12,407 Utilities and heat 123, , ,582 Total Functional Expenses $ 3,014,982 $ 395,046 $ 679,624 $ 4,089,652 $ 4,054,117 See Independent Auditor's Report and Notes - 6 -

9 Statements of Cash Flows Years Ended and Cash Flows From Operating Activities: Increase in Net Assets $ 1,270,947 $ 2,718,460 Adjustments to Reconcile Increase in Net Assets to Net Cash Provided (Used) by Operating Activities: Depreciation 253, ,958 Unrealized (gain) loss on investments (638,709) 79,085 Realized gain on investments (223,060) (387,764) Donated fixed assets (5,645) - Campaign income present value discount (268,838) 46,982 (Increase) Decrease in: Unconditional promises to give 1,164,166 (1,052,333) Other pledge receivables 264,402 (237,694) Prepaid expenses (10,000) - Cash surrender value - deferred compensation (55,663) (52,930) Inventories (16,020) 1,897 Increase (Decrease) in: Accounts payable 197,772 (11,876) Accrued payroll and payroll taxes (20,007) 23,616 Annuities payable 2,199 (1,785) Deferred compensation 45,000 45,000 Net Cash Provided (Used) by Operating Activities 1,960,112 1,411,616 Cash Flows From Investing Activities: Proceeds from sale of marketable securities 2,428,591 7,228,776 Purchase of marketable securities (2,600,515) (6,920,048) Acquisition of fixed assets (1,766,321) (513,194) Net Cash Provided (Used) by Investing Activities (1,938,245) (204,466) Cash Flows From Financing Activities: Payments on long-term debt (15,766) (18,969) Proceeds from long-term debt - 31,284 Net Cash Provided (Used) by Financing Activities (15,766) 12,315 Net Increase in Cash, Cash Equivalents, and Restricted Cash 6,101 1,219,465 Cash, Cash Equivalents, and Restricted Cash at Beginning of Year 2,763,413 1,543,948 Cash, Cash Equivalents, and Restricted Cash at End of Year $ 2,769,514 $ 2,763,413 Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest $ 383 $ 928 See Independent Auditor's Report and Notes - 7 -

10 Organization and Significant Accounting Policies Organization Double H Ranch, Inc. (the Ranch) is a non-profit corporation organized under Not-For-Profit Corporation Law of New York State on April 24, As of, the tax years that remain subject to examination by taxing authorities begin with The Ranch is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Ranch s tax-exempt purposes is subject to taxation as unrelated business income. In addition, the Ranch qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization that is not a private foundation under Section 509(a)(2). Program and Supporting Services The following programs and supporting services are included in the accompanying financial statements: Activities Operations of an organization that provides specialized year-round program services for children and their families dealing with life threatening illness. Ski Program Operations of a winter adaptive ski program not open to the general public, to enable seriously ill children who participate at the Ranch to enjoy the sport of skiing. Medical/Clinical Provides medical services for children with life threatening illness who participate at the Ranch. Food Services Provides meals for the children with life threatening illness who attend the Ranch. Facilities Management Includes the maintenance and upkeep of the facilities in order to ensure the safety of the children participating at the Ranch. Management and General Includes the functions necessary to maintain an equitable employment program; ensure an adequate working environment; secure proper administrative functioning of the Board of Directors; and manage the financial and budgetary responsibilities of the Ranch. Fund Raising Provides the structure necessary to encourage and secure private financial support from individuals, foundations and corporations. Financial Statement Presentation Financial statement presentation follows FASB ASC Under FASB ASC , an organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The amounts for December 31, 2016 in the accompanying statement are included to provide a basis for comparison with and present summarized totals only. Accordingly, the December 31, 2016 amounts are not intended to present all information necessary for a fair presentation in accordance with generally accepted accounting principles

11 Organization and Significant Accounting Policies Continued Financial Statement Presentation Continued The following classes of net assets are maintained: Unrestricted Net Assets The unrestricted net asset class includes general and board designated assets and liabilities of the Ranch. The unrestricted net assets of the Ranch may be used at the discretion of management to support the Ranch s purposes and operations. Temporarily Restricted Net Assets Temporarily restricted net assets include donations for a particular asset or program. When the contribution is used for the purpose intended, the amount is released to unrestricted net assets. Permanently Restricted Net Assets Permanently restricted net assets consist of endowment fund investments to be held indefinitely, the income from which is expendable to support the Ranch s programs and operations. Use of Estimates The presentation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Fair Value Measures The Ranch has adopted ASC ASC defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP) and expands disclosures about fair value measurements. ASC establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC are: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). A financial instrument s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Cash and Cash Equivalents For purposes of the statement of cash flows, the Ranch s investment in money market funds and certificates of deposit with maturities less than 91 days have been considered a cash equivalent

12 Organization and Significant Accounting Policies Continued Concentration of Credit Risk The Ranch has several deposit accounts at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Cash at these institutions may at times, exceed Federal insured limits. The amount in excess of the FDIC limits totaled $1,757,987 and $1,184,099 at and 2016, respectively. The Ranch has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents. The Ranch also maintains cash and securities at brokerage firms which are insured for up to $500,000, with a limit of $250,000 for cash, by the Securities Investor Protection Corporation (SIPC). The risk is managed by maintaining cash and securities in high quality financial institutions. Inventories Inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Inventories consist principally of merchandise held for re-sale. Fixed Assets Property and equipment are stated at cost. The Ranch follows the practice of capitalizing all expenditures for land, buildings and equipment in excess of $1,000. The fair market value of donated fixed assets, if significant in amount, is also capitalized. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Interest incurred during construction is not capitalized. Securities Investments in marketable securities are stated at fair value. Realized and unrealized gains or losses are determined by comparison of costs (determined on a first-in, first-out basis) to proceeds or market, respectively. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence or nature of any donor restrictions. Support that is not restricted by the donor is reported as an increase in unrestricted net assets. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Restricted contributions whose restrictions are met in the same reporting period are recorded as unrestricted contributions. Non-Cash Contributions Donated real estate, furniture, equipment and services are reflected in the financial statements at their estimated market values at the date of receipt. Unconditional Promises to Give Contributions are recognized when the donor makes a promise to give to the Ranch that is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. The Ranch believes that all promises to give are collectible within their specific time period, thus no allowance for uncollectible promises to give is maintained. Unconditional promises to give due in subsequent years are reflected as long-term promises to give and are recorded at the present value of their net realizable value, using interest rates applicable to the years in which the promises are received to discount the amounts

13 Organization and Significant Accounting Policies Continued Advertising and Promotion The Ranch expenses advertising as incurred. Advertising and promotion expense was $103,793 and $130,293 for the years ended and 2016, respectively. Expense Allocation The costs of providing various programs and other activities have been summarized on a functional basis in the statement of activities and in the statement of functional expenses. Accordingly, certain costs that benefit more than one function have been allocated among the programs and supporting services. Cash and Cash Equivalents The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statements of financial position that sum to the total of the same such amounts shown in the statements of cash flows at and Cash and cash equivalents $ 1,034,924 $ 841,848 Restricted cash and cash equivalents 792, ,555 Cash and cash equivalents, non-current 941,895 1,005,009 Restricted cash and cash equivalents, non-current - 1,001 Total cash, cash equivalents, and restricted cash $ 2,769,514 $ 2,763,413 Amounts included in restricted cash and cash equivalents represent those required to be set aside for temporarily restricted purposes in relation to capital construction projects and cash received with a donor imposed restriction that limits use of that cash to long-term purposes. Investments The investments consist of mutual funds and marketable securities which are carried at fair value determined at December 31. Fair values and unrealized gains (losses) at and 2016 are summarized as follows: Unrealized 2017 Cost Fair Value Gains (Losses) Fixed income securities $ 2,482,778 $ 2,468,193 $ (14,585) Equity securities 4,123,184 5,026, ,998 Total $ 6,605,962 $ 7,494,375 $ 888,

14 Investments Continued 2016 Cost Fair Value Unrealized Gains (Losses) Fixed income securities $ 2,020,443 $ 1,984,193 $ (36,250) Equity securities 4,189,850 4,476, ,640 Total $ 6,210,293 $ 6,460,683 $ 250,390 The fair value measurement of investments at December 31, was as follows: Description 2017 Fair Value Measurements at Reporting Date Using: Quoted Prices Significant In Active Other Significant Markets For Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Investments $ 7,494,375 $ 7,494,375 $ - $ - Description 2016 Fair Value Measurements at Reporting Date Using: Quoted Prices Significant In Active Other Significant Markets For Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Investments $ 6,460,683 $ 6,460,683 $ - $ - Endowment Funds The Ranch classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment, the original value of subsequent gifts to the permanent endowment, and accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The investment objective of the Ranch endowment fund is designed to provide long-term growth of principal and a stream of earnings to further the mission of the Ranch. The endowment will be managed by an investment manager in a manner satisfactory to the Board of Directors of the Ranch to generate a return that equals or exceeds the inflation rate as published by the Consumer Price Index. The Ranch honors the donors specific, written restrictions or directives. The endowment distribution policy denies withdrawal of the initial gift. The Ranch s policy permits a spending of income and investment appreciation of up to 6% of the endowment s average market value for the prior 12 quarters. Funds withdrawn may be used for purposes of continuing the mission of the Ranch

15 Endowment Funds Continued The changes in, and composition of, endowment net assets for the year ended are as follows: Permanently Restricted Endowment Net Assets Beginning of Year $ 5,500,927 Contributions 90,000 Endowment Net Assets End of Year $ 5,590,927 The changes in, and composition of, endowment net assets for the year ended December 31, 2016 are as follows: Permanently Restricted Endowment Net Assets Beginning of Year $ 5,350,927 Contributions 150,000 Endowment Net Assets End of Year $ 5,500,927 Endowment net asset composition by type of funds as of : Unrestricted Temporarily Restricted Permanently Restricted Total Permanently restricted endowment funds $ 643,866 $ - $ 5,590,927 $ 6,234,793 The endowment net income classified as unrestricted net assets includes the following: Dividends and interest income $ 111,914 Realized gain on sale 182,283 Unrealized gain 500,823 Investment fees (35,983) Amounts appropriated for expenditure (310,872) Total $ 448,165 Endowment net asset composition by type of funds as of December 31, 2016: Unrestricted Temporarily Restricted Permanently Restricted Total Permanently restricted endowment funds $ 158,565 $ - $ 5,500,927 $ 5,659,

16 Endowment Funds Continued The endowment net loss classified as unrestricted net assets includes the following: Dividends and interest income $ 113,909 Realized gain on sale 333,288 Unrealized loss (67,734) Investment fees (39,621) Amounts appropriated for expenditure (406,003) Total $ (66,161) Property and Equipment Property and equipment at and 2016 are comprised as follows: Buildings and leasehold improvements $ 3,889,204 $ 3,116,044 Furniture and fixtures 228, ,496 Machinery and equipment 1,866,790 1,836,189 Displays 28,627 28,627 Construction in progress (building renovations) 1,201, ,302 7,214,624 5,442,658 Land - Queensbury, NY 540, ,000 Total property and equipment 7,754,624 5,982,658 Less: accumulated depreciation (3,249,753) (2,996,187) Property and equipment, net $ 4,504,871 $ 2,986,471 Depreciation expense totaled $253,568 and $240,958 for the years ended and 2016, respectively

17 Non-Cash Donations During the years ended and 2016, the Ranch received the following non-cash donations which have been reflected in the Ranch s statement of activities: Activities supplies $ 12,150 $ 23,377 Facilities supplies 10,388 - Property and equipment 5,645 - Operating non-cash donations 28,183 23,377 Fund raising non-cash donations relating to special events 73,283 70,756 Total non-cash donations $ 101,466 $ 94,133 The following non-cash donations were not valued in the financial statements as there is no objective basis available to value these items: 1. The use of the facilities where the Ranch operates were donated by the Charles R. Wood Foundation which owns the real and much of the personal property at the site. All operating and maintenance expenses for the facilities are the responsibility of the Ranch. 2. Some of the medical attention provided to the children attending the Ranch by physicians and registered nurses who volunteer their services. 3. Various program help and support of daily operations of the Ranch including counseling, chaperoning, grounds maintenance, housekeeping and coordination of various camper activities were provided by the general public of the surrounding communities. Special Events During the years ended and 2016, the Ranch held several fundraising events. Net revenue generated from events was as follows: Gross events revenue $ 1,093,661 $ 1,066,025 Expenses relating to events (299,551) (249,192) Net revenue generated from events $ 794,110 $ 816,833 Contributions received at events in addition to ticket sales are included in gross event income. Special events revenues are presented in the statement of activities net of expenses

18 Lease Revenue In 1995, the Ranch received a donation from Charles R. Wood of acres of land, valued at $540,000, which was under a long-term lease with Burger King Corporation; the land has been improved for use as a Burger King Restaurant outlet. The property is located in the Town of Queensbury, New York between Exit 19 of I-87 and Route 9, adjacent to the enclosed Aviation Mall facility. The current lease expired in December 2015 and called for annual rent of $54,000 in An appraisal was conducted by an outside source and valued the current rental payment at $57,000 on an annual basis. The lessee is responsible for all expenses relating to the property including repairs, maintenance, insurance and real estate taxes. The lessee, Carrols Corporation, exercised its option to renew its obligation under the lease for four additional periods of five years each with annual rents starting in the initial five-year period of the option at $57,000 and graduating to $91,291 in the last five-year period which ends December 31, Unconditional Promises to Give Unconditional promises to give consist of Board Designated pledges and donor pledges to the Campaign to raise funds to be permanently restricted for investment purposes or temporarily restricted for Capital Campaign purposes totaled $7,224,167 and $8,388,333 at and 2016, respectively Receivable in less than one year $ 640,183 $ 811,666 Receivable in one to five years 530,984 1,195,667 Receivable after five years 6,053,000 6,381,000 Total 7,224,167 8,388,333 Less: unamortized discount (3,137,521) (3,406,358) Net unconditional promises to give $ 4,086,646 $ 4,981,975 Proceeds collected from Capital Campaign pledges and donations are to be used for capital projects planned by the Ranch. Proceeds collected from Campaign pledges and donations are invested to preserve and increase principal. Annual payout to fund the operating budget is limited up to 6% of the prior twelve quarters average asset value of the permanently restricted fund. Permanently restricted funds are to be kept in perpetuity as an endowment fund. Level 3 Reconciliation 2017 Beginning of Year Fair Market Value $ 4,981,975 New Pledges Receivable 285,000 Cash Received Against Pledges (1,299,167) Pledges Written Off (150,000) Amortized Discount 268,838 End of Year Fair Market Value $ 4,086,

19 Unconditional Promises to Give Continued The fair value measurement of unconditional promises to give at December 31, was as follows: Description 2017 Fair Value Measurements at Reporting Date Using: Quoted Prices In Active Markets For Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Unconditional promises to give $ 4,086,646 $ - $ - $ 4,086,646 Description 2016 Fair Value Measurements at Reporting Date Using: Quoted Prices In Active Markets For Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Unconditional promises to give $ 4,981,975 $ - $ - $ 4,981,975 The discount rate used to value long-term promises to give was 8% for both 2017 and The discount rate was not adjusted for a variable component due to the positive history of collectability of the Ranch s promises to give. Notes Payable In 2014, the Ranch entered into a 36-month loan agreement for the purchase of a tractor with monthly payments of $1,019, including interest at 5%, maturing on August 25, $ - $ 8,033 In 2016, the Ranch entered into a 36-month loan agreement for the purchase of a van with monthly payments of $663, including interest at.9%, maturing on June 17, ,703 27,436 Total long-term debt 19,703 35,469 Less: current portion (7,821) (15,786) Long-term debt, net of current portion $ 11,882 $ 19,

20 Notes Payable Continued Maturities of the notes payable follows: Years ending December 31, 2018 $ 7, , ,994 Total $ 19,703 Total interest expense recognized for 2017 and 2016 was $383 and $928, respectively. Charitable Gift Annuity In 2008, the Ranch entered into charitable gift annuity agreements with four donors and in 2017 with one donor. These agreements provide for quarterly payments payable for the life of the donors. Annuity payments in the amount of $5,346 and $4,506 were made for the years ended and 2016, respectively. The Ranch records the net present value of estimated amounts due as current and long-term liabilities using a 5% rate of return. Line of Credit In 2017, the Ranch opened a line of credit in the amount of $1,500,000 with a bank at an interest rate of 3%. A security interest in the form of inventory, accounts receivable, furniture, fixtures and equipment has been granted as collateral in relation to the line of credit. No balance was due at December 31, Unrestricted Net Assets Total unrestricted net assets as of and 2016 amounted to $9,404,757 and $7,494,863, respectively. Of the unrestricted net assets, the board has designated net assets as an operations reserve in the amounts of $3,923,156 and $3,928,786, respectively. Temporarily Restricted Net Assets Net assets were temporarily restricted for the following purposes: Capital campaign projects $ 1,274,827 $ 2,066,890 Roofing project 38,841 - Total $ 1,313,668 $ 2,066,

21 Permanently Restricted Net Assets Net assets were permanently restricted for the following purposes: Permanently restricted endowment $ 5,590,927 $ 5,500,927 Permanently restricted endowment pledges receivable 1,741,473 1,717,198 Land at cost 540, ,000 Total $ 7,872,400 $ 7,758,125 Land recorded as permanently restricted was donated to the Ranch under the conditions that if it was to be sold in the future, the proceeds of the sale would become part of the permanently restricted endowment fund. Allocation of Joint Costs During the years ended and 2016, the Ranch conducted activities that included requests for contributions, as well as program and management and general components. Those activities included direct mail campaigns, special events and telephone solicitations. The costs of conducting these activities included a total of $431,364 and $397,262, respectively, of joint costs, which are not specifically attributable to particular components of the activities. Joint costs were allocated as follows: 2017 Promotion and Direct Mail Special Events Telephone Solicitation Total Ranch program $ 49,296 $ - $ 10,358 $ 59,654 Management and general ,531 12,739 Fund raising 54, ,551 5, ,971 Total $ 103,793 $ 299,551 $ 28,020 $ 431, Promotion and Direct Mail Special Events Telephone Solicitation Total Ranch program $ 67,431 $ - $ 5,719 $ 73,150 Management and general 100-9,646 9,746 Fund raising 62, ,192 2, ,366 Total $ 130,293 $ 249,192 $ 17,777 $ 397,

22 Commitments and Contingencies The Ranch leases the land and buildings in Lake Luzerne, New York from the Charles R. Wood Foundation for $1 per year. It is a 40-year lease that was renewed in 2005 for 10 years, renewed in 2015 for 25 years, and renewable in 2040 for an additional 25 years. In August 2016, the Charles R. Wood Foundation Board approved the option of extending the lease agreement with the Double H Ranch, Inc. The lease agreement was extended from 2040 to 2065 with an annual payment of $1 due to the Wood Foundation. The Double H Ranch, Inc. Board voted to accept the lease at that time instead of waiting for the current lease to expire. A lump sum payment of $25 for the years covered under the lease extension was prepaid. Pension Plan The Ranch has a Simple IRA Plan available to all full-time, year-round employees after three months of service. The Ranch matches dollar for dollar up to 3% of the employee s base salary. The Ranch s contribution was $31,960 in 2017 and $30,633 in Deferred Compensation On or about February 23, 2009, Double H Ranch entered into a deferred compensation plan with the Chief Executive Officer. The Ranch s obligations under the plan are being funded by means of a life insurance policy with Northwestern Mutual Life Insurance Company. Under the terms of the plan, the Chief Executive Officer will begin receiving annual benefits at age 62 from the cash surrender value of the policy. In the event of his death before age 62, the deferred compensation agreement stipulates the employee s death benefit, in an amount ranging from $420,000 to $567,000 depending upon his age at death (from age 56 through age 62), that is to be paid to his designated beneficiary. The deferred compensation is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. A liability is also accrued for the obligation under the plan. The expenses incurred for the deferred compensation for the years ended and 2016 were $46,314 and $46,314, respectively. The resulting deferred compensation liability was $405,000 and $360,000 as of and 2016, respectively. Subsequent Events The Ranch has evaluated all events through March 19, 2018, the date which these financial statements were available to be issued, and determined that there are no subsequent events which require disclosure